Carers are self-employed and must submit their own tax returns. Fees are taxable but the Government offers tax relief for foster carers. Earnings under £19,000 are tax free. For more information see the HMRC website
An annual statement of fees paid in respect of each carer can be provided by the Council. You are also advised to retain weekly or monthly remittance advice which details payments made.
Also read about insurance requirements for carers